Classificaiton

Advance Analytics with R (UG 21-24)

Ayush Patel

Before we start

Please load the following packages

library(tidyverse)
library(MASS)
library(ISLR)
library(ISLR2)

Access lecture slide from bit.ly/aar-ug

Warrior's armor(gusoku) — Source: Armor (Gusoku)

Hello

I am Ayush.

I am a researcher working at the intersection of data, law, development and economics.

I teach Data Science using R at Gokhale Institute of Politics and Economics

I am a RStudio (Posit) certified tidyverse Instructor.

I am a Researcher at Oxford Poverty and Human development Initiative (OPHI), at the University of Oxford.

Reach me

ayush.ap58@gmail.com

ayush.patel@gipe.ac.in

Learning Objective

Dip our toes into classification techniques. How to apply and assess these methods.

References for this lecture:

Chapter 4, ISLR (reference)
Chapters 9, Intro to Modern Statistics (Reading for intuitive understanding)
Chapter 10.2 Modern Data Science with R

What is Classification?

Predict qualitative response
Approaches of predicting qualitative response, a process called classification.
A method or technique can be referred to as a classifier.
We will look into: logistic regression, linear discriminant analysis, quadratic discriminant analysis, naive Bayes and K-nearest neighbours

What actually happens

“….often the methods used for classification first predict the probability that the observation belongs to each of the categories of a qualitative variable, as the basis for making the classification. In this sense they also behave like regression methods.”

Why not use linear regression??

Nominal categorical variables have no rank. How to provide quantitative values?
Distance between Ordinal variable values are not easy to assign.
Could do something when the response is nominal with only two levels.
No guarantee that our estimates will be between [0,1]. Makes interpreting probabilities difficult.

`Default` data

default	student	balance	income
No	No	729.5265	44361.625
No	Yes	817.1804	12106.135
No	No	1073.5492	31767.139
No	No	529.2506	35704.494
No	No	785.6559	38463.496
No	Yes	919.5885	7491.559
No	No	825.5133	24905.227
No	Yes	808.6675	17600.451
No	No	1161.0579	37468.529
No	No	0.0000	29275.268
No	Yes	0.0000	21871.073
No	Yes	1220.5838	13268.562
No	No	237.0451	28251.695
No	No	606.7423	44994.556
No	No	1112.9684	23810.174
No	No	286.2326	45042.413
No	No	0.0000	50265.312
No	Yes	527.5402	17636.540
No	No	485.9369	61566.106
No	No	1095.0727	26464.631

Logistic Regression

Logistic regressions are well suited for qualitative binary responses.
default variable from Default is our response($Y$).
It has two levels Yes or No.
We model the probability that $Y$ belongs to one a particular category.
$Pr(default = Yes|balance)$ - logistic model estimates this. Is referred to as $p(balance)$ as well.
Mainly, depending on risk aversion behaviour, $a$ is chosen. $p(balance) > a$, where $0<=a<=1$.

But what if ?

I ran this: $p(balance) = \beta_0 + \beta_1X$

Code
Output

## make a dummy for default

Default|>
  mutate(
    default_dumm = ifelse(
      default == "Yes",
      1,0
    )
  )-> def_dum

## regress dummy over balance and plot 

lm(default_dumm ~ balance, 
   data = def_dum)|>
  broom::augment()|>
  ggplot(aes(balance,default_dumm))+
  geom_point(alpha= 0.6)+
  geom_line(aes(balance, .fitted),
            colour = "red")+
  labs(
    title = "Linear regression fit to qualitative response",
    subtitle = "Yes =1, No = 0",
    y = "prob default status"
  )+
  theme_minimal() -> plot_linear

## Run the logistic regression

glm(
  default_dumm ~ balance,
  data = def_dum,
  family = binomial
)|>
  broom::augment(type.predict = "response")|>
  ggplot(aes(balance,default_dumm))+
  geom_point(alpha= 0.6)+
  geom_line(aes(balance, .fitted),
            colour = "red")+
  labs(
    title = "Logistic regression fit to qualitative response",
    subtitle = "Yes =1, No = 0",
    y = "prob default status"
  )+
  theme_minimal() -> logistic_plot

Logistic Model

We saw that some fitted values in the linear model were negative.

We need a function that will return values between [0,1].

\[p(X) = \frac{e^{(\beta_0 + \beta_1X)}}{1+e^{\beta_0 + \beta_1X}}\]

This is the logistic function, modeled by the maximum likelihood method.

odds:

\[\frac{p(X)}{1-p(X)}\] **log odds or logit:

\[log(\frac{p(X)}{1-p(X)}) = \beta_0 + \beta_1X\]

Exercise - concept

if the following are the results of the model $logit(p(default)) = \beta_0 + \beta_1Balance$:

term	estimate	std.error	statistic	p.value
(Intercept)	-10.651330614	0.3611573721	-29.49221	3.623124e-191
balance	0.005498917	0.0002203702	24.95309	1.976602e-137

What is the probability of default with balance $5000??

Multiple logistic Regression

\[p(X) = \frac{e^{(\beta_0 + \beta_1X_1 + \beta_2X_2+...+\beta_nX_n)}}{1+e^{\beta_0 + \beta_1X_1 + \beta_2X_2+...+\beta_nX_n}}\]

term	estimate	std.error	statistic	p.value
(Intercept)	-1.086905e+01	4.922555e-01	-22.080088	4.911280e-108
income	3.033450e-06	8.202615e-06	0.369815	7.115203e-01
balance	5.736505e-03	2.318945e-04	24.737563	4.219578e-135
studentYes	-6.467758e-01	2.362525e-01	-2.737646	6.188063e-03

term	estimate	std.error	statistic	p.value
(Intercept)	-3.5041278	0.07071301	-49.554219	0.0000000000
studentYes	0.4048871	0.11501883	3.520181	0.0004312529

How to know if its good?

There is no consesus in statistics community over a single measure that can describe a goodness of fit for logistic regression.

glm(
  default_dumm ~ income + balance + student,
  data = def_dum,
  family = binomial
) -> mod_logit

DescTools::PseudoR2(mod_logit,
                    which = c("McFadden", "CoxSnell",
                              "Nagelkerke", "Tjur"))

  McFadden   CoxSnell Nagelkerke       Tjur 
 0.4619194  0.1262059  0.4982860  0.3355203

AIC(mod_logit) # be careful with this

[1] 1579.545